Transfer pricing

If you are part of a Multinational Enterprise (MNE) and have international dealings with other associates or branches within the MNE, this information may be relevant to you.

Where a tax treaty exists, we usually raise a transfer pricing or profit reallocation adjustment under both of the following:

• Division 13 of the Income Tax Assessment Act 1936 (ITAA 1936)
• the Associated Enterprises article (usually Article 9) of the relevant treaty.

The Associated Enterprises article contains its own provisions to deal with profit shifting arrangements and also mandates the 'arm's length' principle for international dealings between associated enterprises.

We may apply the provisions of Division 13 and the Associated Enterprises article when making a transfer adjustment. The results should be consistent as Division 13 and Associated Enterprises article are both based on the arm's length principle, though the precise wording of the treaty should be considered. If the results are inconsistent, the treaty provisions will apply, unless the treaty itself gives precedence to the domestic law - refer to section 4(1) of ITAA 1936).

Other publications

For more information about transfer pricing or Australia's tax treaties, refer to:

• What are tax treaties?
• New Advance Pricing Arrangement Practice Statement
• International transfer pricing - introduction to concepts and risk assessment
• International transfer pricing - applying the arm's length principle
• International transfer pricing - a simplified approach to documentation and risk assessment for small to medium business
• Mutual Agreement Procedures (MAP) Operational Guidance for Member Countries of the Pacific Association of Tax Administrators (PATA)
• Bilateral Advance Pricing Arrangement (BAPA) operational guidance for member countries of the Pacific Association of Tax Administrators (PATA)
• Pacific Association of Tax Administrators (PATA) transfer pricing documentation package
• International dealings schedule (NAT 73345) - for use by companies, trusts and partnerships to assist with completion of 2012 tax returns
• International dealings schedule instructions 2012.

Rulings

• TR 94/14 - Income tax: application of Division 13 of Part III (international profit shifting) - some basic concepts underlying the operation of Division 13 and some circumstances in which section 136AD will be applied
• TR 97/20 - Income tax: arm's length transfer pricing methodologies for international dealings
• TR 98/11 - Income tax: documentation and practical issues associated with setting and reviewing transfer pricing in international dealings
• TR 2000/16 - Income tax: international transfer pricing - transfer pricing and profit reallocation adjustments, relief from double taxation and the Mutual Agreement Procedure

More information

Proposed measures

The government is continually reviewing international tax arrangements. For more information about how potential international legislative changes may affect you, refer to New legislation.

If you need help in applying this information to your own situation, contact us by phone.